Stanford University’s Travel ProgramFYI Forum7.16.02 AGENDA Current Travel Program Overview Travel Industry Update Stanford Travel Program Challenges Suggestions for Direction on Next Steps (Presentation Made Previously to UMG on 5.23.02, CFO on 6.5.02, and SLAC Senior Mgmt on 6.21.02)
Stanford University’s Travel ProgramFYI Forum7.16.02 • Presentation Objective • Given the Changes in Technology, Travel Practices, and Campus Feedback, Should Stanford’s Travel Program be Redefined, Reduced in Scope, or Eliminated? • What Level of Controls are Required to Meet Government Travel Compliance Expectations?
Current Factors in Today’s Travel Industry • Airlines Losing Money at Unprecedented Rate “All told, the U.S. airline industry is expected to post collective losses topping $2 billion for the first three months of this year, the second-worst quarter ever, exceeded only by last year’s fourth quarter.” Wall Street Journal, April 17, 2002 • Posted First Quarter Results: • American Airlines: $575M loss • United Airlines: $510M loss • Delta: $375M loss • America West: $358M loss • Northwest Airlines: $171M loss • Southwest Airlines: $21.4 M gain
Current Factors in Today’s Travel Industry • Travel Agencies Squeezed by Commission Cuts and • Travel Slump • Agencies have historically received commissions from airlines for • tickets purchased. Following deregulation in 1995, commissions began being • reduced. • - 10% in 1995 • - 8 % in 1997 • - 5 % in 1999 ($50 cap) • - $20 cap in August 2001 (5%) • - 0% March 2002 • Car Rental Companies Eliminate Agency Commissions in April 2002
Current Factors in Today’s Travel Industry In 2001 Stanford travelers using Navigant, generated $252,164 in airline commissions used to offset travel program costs with agency
Current Factors in Today’s Travel Industry • Increased Use of On-Line Bookings • (both airline-direct and third-party (Orbitz, Expedia, etc)) “Online ticket sales…will jump 31% this year, despite an overall decline in bookings since late 2001” Wall Street Journal, April 17, 2002 • “Nielson//Netratings, specializing in Internet audience measurement • and analysis, said that 51.2 million peopled used the Internet as a means • to arrange travel plans in March…” a 12% increase over February • National Business Travelers Association, April 19, 2002 • Potential Gov’t Regulation of On-line Ticket Sites
Stanford Travel Program Challenges • Meeting OMB A-21 compliance requirement • Deferred Billing Program Requiring Upgrade or Replacement • Campus Resistance to use of a Preferred Travel Agency
Travel Compliance Airfare costs in excess of the lowest available commercial discount airfare, …or customary standard (coach or equivalent) airfare, are unallowable…. Where an institution can reasonably demonstrate to the sponsoring agency either the nonavailability of discount airfare or Federal contract airfare for individual trips or, on an overall basis, that it is the institution’s practice to make routine use of such airfare, specific determinations of nonavailability will generally not be questioned by the Federal Government, unless a pattern of avoidance is detected. OMB Circular NO. A-21 (revised 8/8/00) Sec J, 48.c (travel costs, commercial air travel)
Deferred Billing Issues • Current System Obsolete and at Risk of Failing • Custom Application built in FoxPro • Application Supported by Single ITSS Programmer • Resides on Obsolete Single Mac Workstation • That Cannot be Upgraded Due to FoxPro Constraints
Deferred Billing Issues • Options: • Request ITSS to Rebuild System • Discontinue Deferring Air Charges - Traveler is Reimbursed Upon • Completion of Travel (not delinquent with Amex until 60 days past • billing cycle) • Provide Individual Advances to Travelers, Clearing Advance on • Completion of Travel • Change Policy, Allow for Reimbursement in Advance of Travel. • Would Require Booking Through Preferred Agency to Allow for • Tracking of Unused Tickets.
Stanford Travel Program Challenges • Campus Resistance to use of a Preferred Travel Agency • The issue today is not specific shortcomings with • our current agency, Navigant International, but instead • a belief that agencies are no longer relevant or of value • with today’s web booking tools, airline direct • reservations, and non-CRS airlines (Southwest and Frontier)
Stanford Travel Program Challenges • Campus Resistance to use of a Preferred Travel Agency • Major Issues Expressed: • Expensive (relative ticket prices) • Fees • Service
Is Navigant More Expensive? Topaz International, an airfare audit firm that audits agencies to assure it’s corporate customers are offered the lowest airfare, recently conducted a study between corporate travel programs vs. fares for the same flight on Internet sites. Between 15 and 20 companies, all Topaz customers, were subjects. All had at least one negotiated airline agreement. Topaz compared reservations with agency to websites. Sites searched included Travelocity, Expedia, Orbitz, Cheap Tickets, and Airline Websites.
Is Navigant More Expensive? Topaz determined that it found lower fares on the internet sites 7% of the time. Topaz found that fares offered by travel agents averaged $170 less per ticket. “We’re finding that the combination of the agency’s preferred- Supplier agreements and the company’s negotiated agreements usually is sufficient to beat the lowest price on the internet” Valerie Estep, President Topaz source: National Business Travelers Association, April 17, 2002
Airfares Comparison • Advance Purchase - 21 days • Search Results from 6.4.02 • TRIP Orbitz United • From ToTRIP Fee TotalOrbitz Fee TotalTotal • SFO JKF $322 $23 $345 $356 $5 $361 $356 • SFO BOS $433 $23 $429 $475 $5 $480 $475 • SFO ATL $349 $23 $372 $382 $5 $387 $382 • SFO BWI $418 $23 $441 $458 $5 $463 $458 • SFO ORD $243 $23 $266 $256 $5 $261 $268
Airfares Comparison • Advance Purchase - 21 days • Search Results from 5.21.02 • TRIP Orbitz United • From ToTRIP Fee TotalOrbitz Fee TotalTotal • SFO JKF $322 $23 $345 $356 $5 $361 $356 • SFO BOS $406 $23 $429 $445 $5 $450 $445 • SFO ATL $322 $23 $345 $412 $5 $417 $412 • SFO BWI $389 $23 $412 $216 $5 $221 $216 • SFO ORD $243 $23 $266 $256 $5 $261 $256
Why Use Stanford’s Preferred Agency? • Support – Before, During, and After Travel • Navigant / Orbitz Agreement • TRIP – Stanford’s Web Booking Tool trip.stanford.edu • use with SideStep – Airfare Web Search Tool – • bolt-on” to TRIP (PC / ie only) www.sidestep.com • United Discounts
Stanford Travel Program Challenges • Campus Resistance to use of a Preferred Travel Agency • Options: • Discontinue Travel Agency Relationship and allow Travelers • to seek own fares using web, consolidators, etc. Impacts • Department Card, Deferred Billing Program, and United Agreement. • Continue Travel Agency Relationship • Key components would be: • Place higher emphasis on Stanford’s web booking tool, TRIP, • along with incorporating new 3rd party airfare search tool, SideStep. • Consider scalable service options, providing travelers increasing • levels of service, with a corresponding pricing structure • Investigate offering multiple agencies from which to book
Stanford Travel Program Challenges Questions: Is Current Travel Policy and Procedures Sufficient for Compliance, Excessive, or Insufficient? Should University Continue Having a Preferred Travel Agency Relationship? Course of Action for Deferred Billing?